Economic growth slows in fourth quarter

An unexpected slowdown

Real gross domestic product increased 2.6% in the fourth quarter of 2017, according to the advance estimate released by the Bureau of Economic Analysis, a slowdown from the 3.2% growth experienced in the third quarter.

This modest increase in real GDP reflects increases in consumer spending, business investment, exports, housing investment, as well as federal and state and local government spending. These contributions were partly offset by declines in inventories, the BEA said in their blog. Imports, which are a subtraction in the calculation of GDP, increased.

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(Source: BEA)

According to BEA, prices of goods and services purchased by U.S. residents increased 2.5% in the fourth quarter after increasing 1.7% in the third quarter. Excluding food and energy, prices rose 1.9% in the fourth quarter, compared to increasing just 1.6% in the third quarter.

For 2017, real GDP increased 2.3%, a slightly larger portion of growth compared to the 1.5% increase in 2016.

The increase in real GDP in 2017 reflected increases in consumer spending, business investment, and exports. These contributions were partly offset by a decrease in inventories, the BEA said.

Prices of goods and services purchased by U.S. residents increased 1.8% in 2017, compared with an increase of 1% in 2016. Excluding food and energy, prices increased 1.7% in 2017 after increasing 1.4% in 2016.

The second estimate for the fourth quarter, based on more complete data, will be released on February 28.

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Commentary

For the first time since 1981, our industry is experiencing a rising interest rate environment. Some people may assume that the current market shift means their business will take a downward turn from which they will never recover. I don’t buy it. The way I see it, challenging times force us to refine our processes and practices.